Earnings Call Transcript - GSK Q1 2023

Operator, Operator

This is the usual Safe Harbor statement. We will comment on our performance using constant exchange rates, or CER, unless stated otherwise. As a reminder, the Consumer Healthcare demerger in 2022 to form Haleon. We're presenting the performance and growth of continuing operations for GSK. Please turn to Slide 3. Today's management presentation will last approximately 30 minutes with the remaining 30 minutes for your questions. Our speakers are Emma Walmsley, Tony Wood, Luke Miels, Deborah Waterhouse, and Iain MacKay, with David Redfern joining the rest of the team for Q&A as we head into the call. Julie Brown will officially start as CFO next week, he is also with us today on the call and is listening in capacity only as part of the CFO succession from NOVA. Turning to Slide four, I'll now hand the call over to Emma.

Emma Walmsley, CEO

Thanks, Nick, and welcome to everybody. Please turn to the next slide. Our purpose is clear: to get ahead of disease together by uniting science, technology, and talent. We are preventing and treating disease at an enormous scale and delivering a new chapter of growth. As a world leader in infectious diseases, we are also focused on building our business in HIV, immunology/respiratory, and oncology. And we're off to a strong start in 2023, showing our strategy continues to deliver for all stakeholders. Excluding Pandemic Solutions, we've delivered double-digit sales growth, including a fifth consecutive quarter of growth across the full portfolio, with excellent commercial performances in vaccines, specialty, and general medicines. Our adjusted operating profit excluding COVID-19 Solutions also grew by 5%, below the rate of sales growth this quarter due to some one-off factors, as well as planned investments in new launches. Iain will cover this in a moment. Our adjusted EPS grew by 14% and is firmly on track for our guidance this year. Our clear capital allocation priorities mean we continue to invest for growth and to deliver shareholder returns, and the Board approved a dividend of 14p for the quarter. Please turn to Slide six. Our continued commercial success comes with a focus on driving the performance of our key growth products, contributing a new record high of 44% of our Q1 sales, adding GBP 500 million of additional revenue versus Q1 of last year. Notable contributions came from Shingrix and our HIV two-drug regimens. Our growth drivers and new launches will support our growth over the decade and beyond. Our business mix continues to shift towards vaccines and specialty medicines, which are now delivering more than 60% of sales, and we're confident this shift will progress to around three-quarters of our revenue by 2026. A large portion of the growth is due to our pipeline launches in recent years. New products launched since 2017 delivered GBP 2.2 billion during Q1 alone, underpinning our confidence in continuous future investment in pipeline development. Please turn Slide seven. Our R&D progress is delivering on our priority to strengthen our long-term growth prospects. In infectious diseases, we're advancing our RSV older adult vaccine through the regulatory process and are on track to get the first U.S. FDA approval in May. We also reported positive data last month from our pentavalent MenABCWY vaccine for adults. We continue to invest in our priority vaccine platforms, including protein-based antigens, mRNA following some encouraging early data in flu this year, and bacterial platforms like MAPS. In HIV, we presented positive data on long-acting Cabenuva compared to a daily oral medicine, and we continue to enhance our portfolio with business development. In March, we signed an exclusive license agreement with SCYNEXIS to access a first-in-class novel antifungal, adding to our growing anti-infectious portfolio. We are also delighted to announce the proposed acquisition of BELLUS Health last week, further strengthening our specialty medicines and building on our respiratory expertise, with the potential best-in-class treatment for refractory chronic cough. We expect to do more targeted business development in the year ahead. Tony and the team look forward to sharing updates on our continued pipeline development and progress throughout the year with a series of therapeutic area-focused management events. I'll now hand it over to him for some more pipeline details.

Tony Wood, R&D Executive

Thank you, Emma. Please turn to Slide nine. Our R&D strategy is focused across four therapeutic areas, shaped by our world-leading capabilities in infectious diseases, our understanding of the immune system, and our technological capabilities. Our pipeline today comprises 68 assets in clinical development, around two-thirds of which target infectious disease and HIV. We are making good progress in continuing to strengthen our growth prospects for 2026 and beyond. This quarter, we saw two U.S. FDA approvals, two advisory committees, and several assets progress through clinical development, including a Phase II start for oligonucleotide NASH asset GSK990. We also started recruiting into our Phase III program for bepirovirsen for the treatment of chronic hepatitis B. Our ambition for bepirovirsen is to improve functional cure rates of chronic hepatitis B in patients and establish a new standard of care. We look forward to presenting data from the Phase III B to get the trial in the second half of this year. Next slide, please. Elsewhere in our infectious diseases portfolio, we reported three important developments in the quarter. Firstly, we received a positive recommendation from the FDA's Advisory Committee for our RSV vaccine. We remain on track for an FDA decision anticipated by May 3. Our Phase III RSV study rerandomized subjects for a second season to receive either vaccine or placebo. These second season data will be important to better understand the duration of protection provided by RSV. Data collection is ongoing, and we expect a steady study report around the year. Secondly, we announced positive data from our MenABCWY Phase III trial, which demonstrated that our pentavalent vaccine has comparable protection to Bexsero and Menveo, was well tolerated with a safety profile consistent with Bexsero and Menveo. Invasive meningococcal disease is an uncommon but serious infection that can cause life-threatening complications and death. Bexsero groups are responsible for most meningococcal infections, and there is currently no single approved vaccine that can protect against all findings of these groups. Our pentavalent vaccine combines the antigenic components of Bexsero and Menveo. If approved, it could provide the broadest meningococcal Bexsero group coverage of the class and a simplified immunization schedule, which we expect will lead to increased vaccine uptake. We will present preliminary data from this Phase III trial at ACIP in May, and we look forward to sharing this data with regulators to make this important vaccine innovation available as soon as possible. Finally, at ECCMID, we presented positive Phase III data for Gepotidacin in the treatment of uncomplicated urinary tract infections. In the U.S. alone, there are around 15 million UTI episodes each year, around a quarter of which are resistant to existing treatments. Gepotidacin has the potential to become the first new class of antibiotics for uncomplicated urinary tract infection in over 20 years. To complement Gepotidacin, we've also been active in business development. At the end of last year, we entered into a novel antibiotic in Phase III for complicated urinary tract infection to our infectious diseases portfolio. Also in March, we agreed to in-license Brexafemme, a novel oral glucan synthase inhibitor approved for treating both vaginal candidiasis. Together, these three novel agents will broaden our anti-infective portfolio, an area of significant societal need. Next slide, please.

Luke Miels, Commercial Executive

Thanks, Tony. Please turn to slide to the next slide. Strong commercial execution in the quarter continues to drive growth across our business. And as you can see on this slide, not only are product areas contributing to growth, but we've also increased sales in each region and provided a balanced strong portfolio with room to grow. Our improved commercial execution capabilities will play an essential role as we launch new products, with value coming through the pipeline and via BD, including the RSV vaccine for older adults. Please turn to Slide 17. This quarter, we delivered strong performance with sales up 10%, excluding Pandemic Solutions and a vaccine strong growth of 9%, excluding COVID-19 Solutions. The quarter was supported by Shingrix up 11% and meningitis up 25%. Shingrix delivered another record quarter of sales and a fifth consecutive quarter of growth, including increasing contributions across all geographies. Shingrix is now available in 31 countries, with 39% of sales coming from outside the U.S. In specialty medicines, including HIV, which Deborah will speak about shortly, we increased sales by 13%, excluding Xevudy to GBP 2.2 billion. In immunology and respiratory, we continue to see growth from our market-leading medicines Benlysta for SLE and lupus nephritis, and Nucala for severe asthma and other eosinophilic diseases. Benlysta continues to be the leader across all major markets. However, there's still plenty of growth with about 25% of biopenetration in the U.S. and even less in other key markets. Nucala remains the first and only biologic approved in four eosinophilic diseases, with new indications driving growth and differentiation. In China, the NRD listing for EGPA has accelerated momentum, setting the foundation for our upcoming launch in severe asthma, and we look forward to our Phase III COP data in 2024. In oncology, sales grew 2% to GBP 136 million despite recent U.S. label changes for BLENREP and Zejula, and we remain focused on execution across the portfolio and look forward to the anticipated launch of momelotinib in myelofibrosis following the U.S. PDUFA date in June. Our General Medicines portfolio grew 9% to GBP 2.7 billion, and the performance was predominantly reflecting the strong growth of Trelegy across all regions, which grew 28% this quarter. We also saw a benefit from the strong allergy season in Japan and continued post-pandemic recovery of our antibiotic portfolio, which contributed GBP 177 million further emphasizing our expertise in this space as we move forward with novel antibiotics emerging from our pipeline and BD efforts. Considering this Q1 performance, we now expect General Medicine sales to be broadly flat to slightly down in the full year. We remain on track to deliver our existing 2023 sales outlook for vaccine and specialty medicines. And you can find these on Slide 35 of the presentation. Please now move to Slide 18.

Deborah Waterhouse, CEO of ViiV Healthcare

Thanks, Luke. Our HIV business delivered sales of GBP 1.5 billion in the first quarter of 2023, growing 15%. Our performance benefited from strong patient demand for our oral two-drug regimens and long-acting injectable medicines, contributing around 10 percentage points of growth. U.S. pricing favourably contributed around 5 percentage points of growth. The inventory build we saw in the U.S. in Q4 of last year has been slower to burn than initially anticipated. We continue to believe this will burn through during the first half of the year. Dovato delivered GBP 396 million in the quarter. Market performance reflects HCP's belief in Dovato, which has become our number one best-selling medicine in HIV. We were also pleased to receive EU approval of Trimac PD in the quarter, the world's first single-tablet dispersal regimen for children with HIV. Turning to Cabenuva, sales for the quarter were GBP 127 million, reflecting strong patient demand with high market access and reimbursement levels across the U.S. and Europe. Our sales and medical teams are reporting positive customer feedback after releasing the SOLAR data at CROI, and our new direct-to-consumer advertising campaign is currently rolling out across the U.S. Moving on to prevention, sales of Apretude, the world's first long-acting injectable for the prevention of HIV, delivered GBP 24 million in the quarter, and we're pleased by the growing momentum across the U.S. We're encouraged by the progress of our pipeline, which is focused on innovative long-acting regimens. We have three clear target medicine profiles: to provide the world's first self-administered long-acting regimen for treatment and to provide ultra-long-acting regimens for treatment and prevention with dosing intervals of three months or longer. We're excited about the potential of these medicine profiles, and we'll be ready to regimen select in H1 2024. In summary, our Q1 performance positions us well to deliver the mid-single-digit growth we expect this year, and we remain very confident in our ambition to achieve a five-year mid-single-digit CAGR to 2026. The change in mix of our portfolio towards long-acting and the success of our pipeline offers the potential to significantly replace the revenue from the dolutegravir loss of exclusivity. And with that, I will hand it to Iain.

Iain Mackay, CFO

Thanks, Deborah. As I cover the financials, references to growth are in constant exchange rates unless stated otherwise. As Luke and Deborah have covered the primary revenue drivers, I'll focus my comments on the income statement, including main cost drivers, margins, cash flow, and guidance for 2023, including our latest phasing expectations. Turning to the next slide. Before I go into the details of the quarter, I want to provide some context around the key factors influencing the performance of both total and adjusted results. As noted by the team, excluding COVID-19 Solutions, we've shown strong operational delivery across the business, growing sales by 10% in the first quarter. Including Pandemic Solutions, sales were down 8%, mainly reflecting lower sales of Xevudy relative to Q1 of 2022. The 10% sales growth drove 5% adjusted operating profit growth, excluding COVID-19 solutions. This included a 4-point adverse impact from legal charges primarily related to the Zejula royalty business. Including the impact of COVID-19 solutions and those legal charges, adjusted operating profit was stable at GBP 2.1 billion. On a total basis, the lower sales, along with the Gilead settlement income of GBP 0.9 billion in the comparator resulted in operating profit being down 15%. On earnings per share, excluding COVID-19 solutions, there was 14% growth on an adjusted basis. The contribution from COVID Solutions reduced this growth rate by 7 percentage points, with adjusted earnings per share up 7% at 37p. Total earnings per share were 36.8p, down 8% on a continuing basis. Turning now to the main adjusting items of note between total and adjusted results for continuing operations in the quarter. These weren't transaction-related, with the net credit primarily reflecting these contingent consideration liability movements, the majority of which relates to foreign exchange. The currency impact was a favorable 5% of sales and 8% in adjusted earnings per share. Turning to Slide 22, adjusted operating margin was 30.1%. This was a 250 basis point improvement versus Q1 2022 at constant exchange rates. The improvement was primarily a function of the factors I've already described, with lower sales of low-margin Xevudy benefiting the cost of goods sold, partly offset by higher SG&A, which included the legal charges primarily related to the Zejula royalty dispute. In addition to these factors, there was continued commercial pipeline investment behind the key products. Starting with the key cost line dynamics for the quarter, within cost of goods sold, the 9.1 percentage point margin benefit was primarily from lower sales of low-margin Xevudy, but was partly offset by an unfavorable comparator to a one-time benefit from inventory adjustments in Q1 of last year, as well as higher freight costs. SG&A growth was ahead of sales and had an adverse 4.9 percentage point margin impact. This primarily reflected launch investment, particularly focused on HIV and Shingrix, to drive demand and support market expansion. There was also increased investments in preparation for the anticipated launches of our candidate RSV vaccine and momelotinib later in the year. The aforementioned increased legal charges added 4 percentage points to SG&A growth in the quarter. R&D spend grew 6% with continued investment across a combination of both early and later stage programs, particularly in vaccines and specialty medicines. Within vaccines, this was driven by Pneumococcal mRNA and Phase II MMR programs. Within Specialty, the early-stage key assets included CCL17 for osteophytic pain and IL-18 for new base diseases. In later clinical phases, there was a higher investment in Jemperli, momelotinib, depemokimab, and bepirovirsen as those programs progressed. These dynamics were partially offset by decreases related to the completion of late-stage clinical development programs for otilimab, cell and gene therapy discontinuation, and reduced R&D investment in BLENREP versus Q1 of 2022. Royalties benefited from Biktarvy's contribution, which includes an additional month in 2023 versus last year. And note that our Gardasil royalty stream will cease at the end of this year. Next slide. Moving to the bottom half of the P&L, I'd highlight the net finance expense, mainly driven from the net savings from maturing bonds, including the sterling notes repurchased in the fourth quarter of last year and either income and cash, and that non-controlling interests were lower due to Q1 2022 other non-controlling interests not repeating. This was as expected. On the next slide, I'll cover our cash flow. In the first quarter, there was a free cash outflow of GBP 0.7 billion. Within free cash flow, cash generated from operations decreased to GBP 287 million, down 88%. This primarily reflected an unfavorable comparison due to upfront income from the settlement received in the first quarter of 2022 and the unfavorable timing of profit share payments to Biogen related to sales of Xevudy. There was also an increase in seasonal inventory and lower payable balances, reflecting increased investments in 2022. The low cash generated from operations led to higher tax payments. Q1 performance and cash generation was in line with expectations and we are on track to deliver outlooks this year. Turning to Slide 25 and considerations for our guidance for 2023. We delivered a good start to the year and are very much on track to deliver our full-year guidance. During Q1 performance, we now expect full-year phasing to be slightly different from that shared in February. Our Q1 performance benefited from slower-than-expected HIV inventory burn and particularly strong general medicines delivery, due to anti-infective market recovery and Japan allergy season dynamics, which we don't expect to persist through the year. For the second quarter, we expect to see destocking in HIV and for general medicines growth to moderate due to the seasonal effects. We therefore expect sales growth in Q2 to be lower than Q1. With these considerations in mind, we now expect first and second half sales growth to be broadly similar. Within this, we now expect general medicines to be broadly flat to slightly down for the year. In the second half, we continue to expect the sales growth to be influenced by the comparator periods. In HIV, this has included U.S. channel inventory build and favorable U.S. pricing, particularly in Q4 of last year. In general medicines, there was a post-pandemic recovery in the antibiotic market and the launch of FLOVENT, our generic, in the U.S. in the second quarter of last year. For this year, we would also expect ongoing pricing pressure in General Medicines, especially in the U.S. and European pricing pressure in the HIV market. With respect to operating profit growth, we still expect this to be lower in the first half of the year compared to the second half relative to full-year expectations. This is informed by continued investment behind ongoing and anticipated launches, including the RSV vaccine and momelotinib. As such, we expect SG&A to grow ahead of sales in Q2, and we still expect SG&A increases to be broadly aligned with turnover for the full year. On COVID-19 Solutions, we still do not anticipate significant future sales. However, based on Q1, we are revising the estimate for the full-year adverse adjusted operating profit impact to be 5 to 6 percentage points. We are off to a good start in 2023 with solid momentum. And with that, I'll hand it back to Emma.

Emma Walmsley, CEO

Thank you, Iain. Turning to Slide 27. We have made building trust by operating responsibly an integral part of our strategy and our culture. Ultimately, we are focused on delivering sustainable growth with returns to shareholders, reducing risk, helping our people thrive, and delivering health impact at scale. Our responsible business framework prioritizes six material areas. And last month, we published our ESG performance report on our progress in each, including a new overall ESG rating that shows we're on track based on 83% of all performance metrics being met or exceeded. On access, one of the most material areas of social responsibility in our sector and one where we are committed to lead, we made further progress, again, by expanding the availability of our HIV prevention medicine, cabotegravir, to 90 countries by signing an agreement with generic manufacturers via the medicines patent pool. We have also enhanced recruitment of diverse patient populations with 100% of our Phase III clinical trials now including a demographic plan, as well as also making great progress in creating a diverse, equitable, and inclusive workplace. Turning to the final slide, 28. So we are off to a strong start in 2023 with all our growth drivers performing. We are focused on our upcoming launches, including our potential RSV older adult vaccine and on continuing to strengthen our pipeline organically and through targeted business development in vaccines and specialty medicines. Our continued momentum commercially and in the pipeline supports our confidence in delivering on our outlook and ambitions to sustain our growth through this decade and beyond, and we look forward to sharing more details at upcoming events. Before closing, I would like to recognize the outstanding contributions made by Iain Mackay as our CFO. This will be his last quarter; indeed, it's his last week before retiring from GSK and has been a fantastic leader, great colleague, and has made an enormous impact in his time here. I want to sincerely and personally thank Iain. Julie has been transitioning into the role with Iain and is officially starting in just a few days. I know you're very much looking forward to spending time with you all as we continue to deliver progress together. With that, Nick, now I think you have further instructions for the Q&A.

Operator, Operator

Absolutely. Thanks, Emma. Our first question is coming from James Gordon. Please go ahead, James.

James Gordon, Analyst

Hi. Can you hear me, Nick?

Kerry Holford, Analyst

Hi. Can you hear me, Nick? Excellent, I have a couple of questions about camlipixant. Tony, you mentioned that approximately 28 million people are affected by RCC worldwide. I'm curious if there are particular patient subgroups or markets that might be more responsive to this drug therapy, possibly those with more severe cases? Additionally, would you be open to discussing the potential peak sales targets for this asset? Lastly, considering the challenges Merck has encountered with efficacy measurements in this area, how confident are you that your asset will not face similar issues?

Emma Walmsley, CEO

Thanks so much, Kerry. This obviously relates to camlipixant; we are obviously delighted to have announced the deal with BELLUS. I'm going to ask Luke to pick up on the dimensions of opportunities in subgroups. It is GBP 28 million, but there are more than GBP 10 million patients who have been living with this for more than a year. So we are very excited about the best-in-class potential and a meaningful contribution that will come after the 2026 launch. But Luke, I know you've been very pleased with the progress from the beginning, so perhaps you could comment on the relative competitiveness.

Luke Miels, Commercial Executive

I think it's important to note that while there is a focus on the 28 million chronic cough patients, we also modeled potential uptake and peak sales projections specifically for subgroups. Individuals who have experienced refractory cough for over a year tend to remain with pulmonologists. We estimate that there are about 3.3 million potential patients in the U.S., around 3 million in Europe, and about half that number in Japan, making it a significant group. Currently, 1.8 million patients in the U.S. are under the care of pulmonologists for this condition, although the actual number is likely higher since many have been referred back to primary care due to limited treatment options. Therefore, we believe this could be a multibillion-dollar product. Moreover, when we speak to physicians treating these patients, they express their frustration with the lack of available options and frequently mention seeing a large number of patients. This data indicates that it is a very compelling asset. Regarding Merck, I will let Tony comment on the filing and the pharmacological profile, particularly the selectivity of P2X3 versus P2X2, which shows a strong and durable differentiation even if the efficacy is similar.

Tony Wood, R&D Executive

Just to underscore that point, two things about the Merck comparison. The selectivity impacts patient experience with the unpleasant taste, leading to significant patient discontinuation. Our product has a 1,500-fold margin of selectivity—it is an enormous difference relative to the order of 15 times greater than Merck's molecule. This gives us confidence in our ability to improve our side effects regarding that selectivity. In addition, regarding data treatment and analysis issues associated with their preceding products, we believe we are aligned with Merck on methodology and are engaged in ongoing discussions with the regulators, confident we'll navigate through that data treatment issue given the medical need this area presents.

Operator, Operator

Next question is from Steve Scala.

Steve Scala, Analyst

Can you hear me?

Emma Walmsley, CEO

Yes.

Steve Scala, Analyst

First, I'd like to clarify, when does GSK plan to initiate Phase III trials in adults and infants for the pneumococcal vaccine? It is still listed as a 2024 readout, but it's not identified as a catalyst any longer in 2024. Thank you.

Emma Walmsley, CEO

Straight to Luke then.

Luke Miels, Commercial Executive

Yes. We will start the Phase III study for adults with the pneumococcal 24-valent vaccine at the beginning of next year. That represents an acceleration relative to our acquisition objectives. We have a Phase III infant program; this is subject to an order finding with regards to the fill and finishing presentation of the vaccine. We are still very confident in the overall profile of the vaccine. In fact, our confidence in the technology continues to grow as we see emerging data from competitors in the field, so I'm very confident in the progression here. We're working to get the infant vaccine study back on track as soon as possible.

Operator, Operator

So the next question is from Graham Parry, Bank of America. Over to you, Graham.

Graham Parry, Analyst

Great. Thanks for taking my questions. So firstly, just on RSV vaccine, any kind of level of confidence you can give over the likelihood of approval in the AdCom next week? Given Barasyndrome is obviously an issue in both the AdCom and the ASA meeting, whether there have been any further requests or data or information relating to that? Secondly, regarding the timing of the 2-season data. I think you said data collection is ongoing, an updated mid-year, but has the FDA requested to see any of that data? Do you think you'll have that data in time for the June ACIP meeting? How does that play into pricing decisions ahead of launch? If you have that data but it's not part of a June ACIP recommendation, can you price this as a 2-year vaccine at the outset? Will you need to start thinking about adjusting pricing post-launch?

Emma Walmsley, CEO

We’ll come to Tony first and then Luke on the specific pricing, recognizing that when you're a week away from going through the regulatory process, pronouncing what's going to happen, we'll be very introspective on that, as well as pricing competition.

Tony Wood, R&D Executive

Where I might start, is by emphasizing the profile of our vaccine. I'm sure you recall, particularly concerning the at-risk populations for hospitalization, where we see 94% vaccine efficacy. That profile for efficacy and the overall safety profile, of course, was recognized at the recent meetings. We continue to randomize patients in the Phase III study. We randomized subjects for the second season to receive a second vaccination and placebo, which gives us the opportunity to make an appropriate comparison regarding second season data. I remind you that our data acquisition is determined by event rates for the second season and thus will be determined by the close of the season. We remain on track to acquire that data, along with other data that we are building the picture for the quality of our vaccine. Also, we are adding data from the At-Risk 50 to 59 population. We expect to have all of this data ahead of ASP, as Emma indicated. And Luke, perhaps I can hand over to you regarding pricing.

Luke Miels, Commercial Executive

Thanks, Tony. To reinforce, Tony and his team are truly focused on this timeline. Our working assumption is that we will see any unusual scenarios that we just miss along deadlines. We do not expect that. I think it would depend on the robustness of the signal. But our working assumption is if we have that second season data, then we would price it at the upper end of the range. We've signalled in the past that the range is likely to be between high-dose flu, in the 60s, to Shingrix, which is 185. Of course, it's moving more toward the right-hand side of that midpoint. And if we have that second season data, then we'd be very much on the right side of that point.

Operator, Operator

Next question is from Richard Parkes at BNP Paribas.

Richard Parkes, Analyst

Thanks Nick, hopefully, you can hear me okay. Just got two questions. Firstly, on Shingrix. I just wondered if you could disclose what underlying U.S. volume demand growth was when you exclude the stocking differences? Could you also update us on ex-U.S. launches, where you're seeing the most traction and how that will evolve through the year? Secondly, the question was for Tony on business development and R&D. Many of the recent transactions have added late-stage programs such as momelotinib, Camlipixant that will help cushion patent expiries that you'll experience later in the decade. But they don't necessarily bring platforms or technology that can help to improve longer-term R&D productivity. My question for Tony is now that he has been in the seat a little bit longer, if he feels confident that GSK is investing in business development to retool the company in terms of technology platforms and capabilities to be competitive and improve internal R&D productivity longer term?

Emma Walmsley, CEO

I'll ask Luke to comment on Shingrix. However, we still see a lot of growth ahead. Then we'll come to Tony. I mean we remain vigilant of the need to ensure this ongoing work remains at the core of our strategy in R&D.

Luke Miels, Commercial Executive

Thanks, Richard. If we look at pharmacists, Shingrix is now their number-one priority. Challenges they had around staffing and elements like that have been resolved. If we look at primary care physicians and their intention to recommend the vaccine, it remains unchanged. So all of those factors are pointing in the right direction. If we look at TRxs, over 60% of them are first doses, which again is consistent with positive trends. In terms of Q1, it was influenced by two distinct events that will normalize through Q2. We had an inventory online in Q1 '22 equal to 0.9%, this quarter, it was 0.6%. As we have discussed before, steady state is around 1 to 2 million doses a month. We expect this will normalize. The second influence was a stronger performance in retail, driven by patients aged 65 and above, which you would expect, particularly with the removal of the co-pay. Commercial patients typically don't have a co-pay, and the non-retail performance was lower due to specific elements, which I won’t detail further. These events combined help explain the quarter's performance, but as I said, we're very optimistic about recovery in Q2. Regarding ex-U.S. markets, 39% of growth continues as we reel in reimbursement decisions. We're making gains in Japan, Australia, and several markets in Europe, with expansions underway. We are also excited about the booster among the immunocompromised population, and possibly those with additional co-morbidities to return and retake the original vaccine.

Tony Wood, R&D Executive

I'm delighted with the platform access we have and the progress we're making. In vaccines, we have the leading protein complexation technology through our partnership with Affinivax, and we're making great progress with CureVac in RNA. We received exciting data from Phase I earlier in the year. This complements our substantial capabilities in vaccine design and adjuvants. We’ve showcased some of this with the RSV vaccine we’ve discussed. In the medicines part of our business, we now hold the strongest nucleotide platform through a multi-target deal with Wave Therapeutics. Regarding platform technologies, I believe we are in an excellent position. As Emma indicated, we continue to be alert for further areas of development. We are also leveraging collaborations that we established recently to better identify patients in oncology to optimize the right combinations. Furthermore, existing partnerships in data and human genetics continue to reinforce our edge in technology. Overall, I believe we're well-positioned across the board regarding both platform and data technology, and you will continue to see this strategy reflected in business development as we look to augment our capabilities as needed.

Emma Walmsley, CEO

Great. Thanks, Tony. Nick?

Operator, Operator

Next question is from Andrew Baum of Citi. Andrew, please go ahead.

Andrew Baum, Analyst

Yes, thank you. A couple of questions. First for Deborah on ViiV. Could you talk to the anticipated impact of the rollback on continuous enrolment under Medicaid on ViiV? My assumption is the economic impact for the group is going to be limited because of the lower profitability and programs like Ram White will plug the gap as anyone loses coverage. But if you could tell me if those assumptions are incorrect. Secondly, for Luke, you've discussed the potential for line agnostic indications for momelotinib in MFS. We are waiting, obviously, for the label I’m sure the NCCN has already reviewed the data; assuming you do get line-agnostic approval, do you have any sense of which category recommendation NCC will rate if you are to challenge Jakafi in that setting? Thank you.

Deborah Waterhouse, CEO of ViiV Healthcare

Great. I think you're referencing the Brave board ruling that highlights some challenges externally in the environment. If not, please stop me. The Affordable Care Act mandates coverage by commercial payers, meaning that they cover preventative services without cost sharing, which is very significant. A number of employees with strong religious beliefs do not want commercial insurers to cover those services. A Texas court found in favor of the plaintiffs, and the Biden Administration has appealed against this judgement. This issue will not only affect HIV for PrEP but actually undermines one of the core tenets of the Affordable Care Act—that preventative services would be covered without cost. Given that this court case is more likely to reach the Supreme Court, it may take a couple of years to resolve. From our perspective, we do not anticipate a short-term impact, and we are closely monitoring all developments. Naturally, we are in contact with the community and various bodies in the U.S. administration. Their view is they will enact policies and other reforms to maintain the ACA mandates around prevention, demonstrating their commitment. It's ironic, but the government has made a tangible commitment to ending the HIV epidemic with a goal of ensuring that 50% of people eligible for PrEP should be prescribed by 2025. So the situation is complex, but we are monitoring with no anticipated impacts in the short to medium term.

Emma Walmsley, CEO

Thanks, Deborah. So Luke?

Luke Miels, Commercial Executive

Yes. The base case for the momelotinib deal referred specifically to second-line anemia patients who are JAK-exposed. However, if we achieve first-line labeling, there’s upsize potential. I must refrain from speculation, as we are currently in discussions with several stakeholders. What I can say, however, is that we are clearly positioning momelotinib as the only agent with profound clinical and durable benefits in terms of spleen and symptom relief for patients with anemia. This notion communicates clearly. If we examine ASH data, the unaided awareness stands around 32%, double the typical hematology benchmark. When we approach physicians in different specialties, we notice over 60% indicate that one key reason for switching patients is related to anemia and transfusion issues. This is a very encouraging environment for us to tap into, and we hope that the NCCN recognizes this when creating guidelines.

Emma Walmsley, CEO

Thank you. We have a few minutes left. I’d caution that another call starts at 1 o'clock, so if we can keep our responses concise.

Operator, Operator

Right, James, back to you at JPMorgan, please.

James Gordon, Analyst

Hello, James Gordon, JP Morgan, and thanks for your patience with my earlier IT problems. Two questions. One on Zantac and one on M&A—related matters. The Zantac case's hearing wasn't favorably concluded as anticipated; thoughts on the implications for liability and timeline on resolution? Given potential funding needs for anti-damages, does this mean GSK may reduce BD efforts? Or do you have room to pursue further BD? Is it viable to leverage Helion stock for additional BD opportunity?

Emma Walmsley, CEO

I want to be clear: we have great confidence in our position regarding Zantac. We respectfully disagree with the conclusions viewed in California, and we will approach the upcoming summer case with confidence as well. Our priority in business development remains unchanged and is key to our R&D strategy. This reflects a significant shift we've driven in our company over recent years, as demonstrated through our recent deals, particularly with the demerger of Hale and restructuring the balance sheet, which only enhances our cash generation capabilities. We are confident about our momentum this year, our five-year outlook, and are keen to expand upon this trajectory strategically and methodically. We prioritize growth in vaccines and specialty medicines, though, as highlighted, we will also address unmet global needs through our infectious disease expertise as well. So we remain firm on this front. Hopefully, that covers your queries. Next question, please.

Operator, Operator

Next question is from Seamus Fernandez at Guggenheim.

Seamus Fernandez, Analyst

I just wanted to grasp the company strategy for flu with mRNA and how you are viewing the competitive landscape. We've recently seen mixed data from competitors like Moderna regarding their vaccine's performance, but we expect further updates later this year. We're eager to know how you perceive the mRNA flu opportunities and your thoughts on competition.

Emma Walmsley, CEO

We are indeed excited about mRNA technology and its early data performance. We plan to increase our investments in mRNA as part of our portfolio. It’s a competitive asset. Luke, could you provide some insights on that?

Luke Miels, Commercial Executive

We currently lack a presence in high-dose flu, and any openings in that segment would represent an upward opportunity. It is our working assumption that a tolerable mRNA vaccine will emerge. Our partnership with CureVac stands strong. The essential advantage of mRNA lies in the rapid transition from bench to the clinic, critical for tailoring strains for future flu seasons. Any acceleration in this capability could lead to increased efficacy over the typical 50% seen annually. We are preparing ourselves for a significant disruption in this space, so we anticipate constructive outcomes. Tony, would you like to add anything in relation to our program?

Tony Wood, R&D Executive

To elaborate on the earlier statement from Emma, the developments in mRNA suggest a pressing need to secure therapeutic indices with regard to the gap between immunogenicity and reactogenicity. We’re excited about the information our partners have shared earlier this year, and we have high expectations of utilizing emerging methodologies and midline bases to enhance our position.

Operator, Operator

Last question will come from Simon Baker at Redburn. Simon, please go ahead.

Simon Baker, Analyst

Thank you, Nick for taking the question. I'll be brief. I just wanted to ask a quick note of gratitude for all the assistance we've received over the years. A couple of quick questions. Firstly, on Camlipixant. Although RCC is obviously a large indication, I wonder what your thoughts are on potential applications beyond RCC, such as overactive bladder and endometriosis. Secondly, regarding Gepotidacin, an excellent job on development thus far. However, commercialization poses challenges historically. Luke, how are you approaching the sale of a new differentiated antibiotic, traditionally seen as a commercial challenge?

Emma Walmsley, CEO

That's an excellent point, as there’s been substantial consideration regarding our anti-infective portfolio. Luke can provide perspectives on Gepotidacin since I know there's been a lot of strategic thought on mitigating commercialization hurdles.

Tony Wood, R&D Executive

Our focus on Camlipixant centers on penetrating the enormous unmet need for the 30 million patients suffering from refractory chronic cough; however, colocalization of the P2X3 ion channel evokes ideas for pain management and other related conditions. Our primary focus is to establish the molecule's profile in Phase III for RCC, where we see the most immediate potential.

Luke Miels, Commercial Executive

We are excited about the profile achieved in Phase III with Tony's team. Typical broad-spectrum antibiotics come with significant restrictions as they are usually reserved for severe circumstances to retain potency and curb resistance. The dynamics change here with Gepotidacin, which focuses specifically on pathogens that show resistance, specifically limited to uncomplicated UTIs and gonorrhea while sidelining postoperative infections. Each year, around 15 million UTI cases arise in the U.S. alone, with roughly a quarter deemed resistant or problematic for patients sensitive to three antibiotics or more. While many Covid patients receive fluoroquinolones — a broad spectrum that exacerbates resistance issues — Gepotidacin distinguishes itself by filling a critical role without creating further resistance, allowing us to remain effective in more serious infections. Moreover, with our strategic approach to integrating Gepotidacin with Tebipenem and other products, we believe there is significant synergy across specialty groups addressing these patients more effectively.

Emma Walmsley, CEO

This concludes our call today. We’re starting off 2023 with all growth drivers performing and solid momentum. Our focus is on upcoming launches and enhancing our pipeline both organically and inorganically, underpinning our confidence in the outlook ahead. Thank you all for attending; we look forward to our next discussions.